Nearly 1 Million in Community College Lack Access to Federal Loans

An increasing number of community colleges are exiting the federal student loan program, leaving nearly a million students without access to affordable options to pay for school.

Nearly 1 in 10 community college students in 32 states have no access to federal student loans, and nearly half of these students are in California and North Carolina. In eight states, more than 20% of students attend schools that have opted out of the federal government's student loan programs. Almost a quarter of the nation's 1,097 community colleges do not offer federal student loans.

According to Danielle Douglas-Gabriel of the Washington Post, minority students are disproportionately impacted by the colleges that withdraw from federal loan programs. The Post points out that, for example, 61% of African-American students in Alabama lack federal loan access compared to 34% of white students. Nearly 86% of Native American students in Montana lack access to federal loans, whereas only 2% of their white peers do. Additionally, community colleges in small towns and rural areas are much more likely than their counterparts in cities and suburbs to lack such access to federal loans.

"A lot of community colleges think that their relatively low tuition means that students don't have to borrow, so opting out of the loan program isn't that big of a deal," said Debbie Cochrane, co-author of the report on community coleges and federal loans. "But the cost of college isn't limited to tuition. It also includes textbooks, transportation and living costs. And very few community colleges students get those costs covered by grants."

On average, one year at a community college, including tuition, fees, and living expenses, costs $7,160 for a full-time, in-state student. That number is about half of what a student would pay at the average public four-year university. Hence, a vast majority of full-time community college students need financial aid to cover costs of their education and living, and just 2% of students have their financial needs fully met by grants.

Most community college students do not take out loans; only 37% of people who complete an associate's degree have borrowed money for it. Education analysts say, however, that all students who need financial assistance should have access to federal loans, which are much more affordable than loans offered by banks and other financial firms. For example, interest rates on Federal Stafford loans for undergraduates hover around 3.76%, while that rate can climb as high as 10% on loans offered by private firms.

According to Molly Hensley-Clancy of BuzzFeed, community colleges are reluctant to participate in federal loan programs out of concern that students will borrow excessively and fail to repay the money. In turn, schools that amass high loan default rates face threats of losing access to other types of federal financial aid, like Pell grants, upon which many students at community colleges rely.

"If you have a campus where 10 percent of students are taking out loans, while 70 percent of your students are getting Pell grants, and you have a default rate that's creeping up â¦ you don't want the defaults of a small percentage of students to imperil the financial aid eligibility of a substantial portion of the student body," says James Hermes, associate vice president of government relations at the American Association of Community Colleges.